05 Jan 2009

Pragmatic Function of Mosaic Laws

All Posts No Comments

(Note to new readers: Every Sunday I try to do a post on religious themes, but sometimes it spills over into Monday.)

I am working my way through the Book of Exodus. Last night was chapter 29, which concerned the sacrificial duties of Moses’ brother Aaron and the other newly anointed priests:

10 “Bring the bull to the front of the Tent of Meeting, and Aaron and his sons shall lay their hands on its head. 11 Slaughter it in the LORD’s presence at the entrance to the Tent of Meeting. 12 Take some of the bull’s blood and put it on the horns of the altar with your finger, and pour out the rest of it at the base of the altar. 13 Then take all the fat around the inner parts, the covering of the liver, and both kidneys with the fat on them, and burn them on the altar. 14 But burn the bull’s flesh and its hide and its offal outside the camp. It is a sin offering.

Now to an atheist, the above sounds fictitious and/or barbaric. But for a Christian or Jew (not sure whether it applies to Muslims also), it would be odd for the Lord to issue such instructions if they didn’t serve some helpful function. For an analogy, a lot of times I tell my own son to do things and he doesn’t understand why, but (I hope!) I am not arbitrarily exercising my superior strength; the rules are issued for his own good (or sometimes because I have a headache).

So with the above passage, a few things occurred to me:

(1) The priests would become very adept at learning animal parts, handling blood properly, etc.

(2) This knowledge, in the minds of the most respected members of the community, would be very useful both for dietary and medicinal purposes. On the latter point, for example, Jesus told the former lepers to go present themselves at the temple. So if the priests are going to be in charge of deciding which people are sick (and need to stay outside the camp for x days) and which people can come back in, you want them to know what they’re doing.

(3) By instructing them to slaughter the finest animals, the Lord causes them both to take Him seriously but also to practice on the best examples. I.e. it would be both dangerous and less instructive if the priests always slaughtered a sickly goat with a limp, just like high school biology students shouldn’t be dissecting frogs that were diseased.

05 Jan 2009

The SEC Makes Wall Street More Fraudulent

All Posts No Comments

So I claim at mises.org, focusing on the Madoff scandal. An excerpt:

In the private sector, when a firm fails, it ceases operations. The opposite happens in government. There is literally nothing a government agency could do that would make the talking heads on the Sunday shows ask, “Should we just abolish this agency? Is it doing more harm than good?” It’s not just Fannie Mae and Freddie Mac: throughout history, virtually every agency created by the federal government has been deemed too important to fail. (I vaguely remember some Republicans in the mid-1990s holding a press conference and declaring that the Department of Commerce was done, and that voters could “stick a fork in it.” I guess they found it was still pink inside.)

The pattern plays out perfectly with the SEC and the Madoff bombshell. Suppose a few years ago, I told a group of MBAs to imagine the worst screwup that the SEC could possibly perform, something so monumentally incompetent that members of Congress might openly question whether the agency should continue. I think that at least half of the class would have come up with something far less outrageous than what has happened in fact.

Here is a chart that may surprise you:

04 Jan 2009

Did FDR Prolong the Great Depression?

All Posts No Comments

Here’s a rather silly post about the Great Depression and whether FDR hurt or helped (HT2 Bob Roddis).

To be sure, you can credibly argue that the New Deal had its share of problems. But overall, the numbers prove it helped — rather than hurt — the macroeconomy. “Excepting 1937-1938, unemployment fell each year of Roosevelt’s first two terms [while] the U.S. economy grew at average annual growth rates of 9 percent to 10 percent,” writes University of California historian Eric Rauchway.

This is singularly irrelevant. First of all, note the hilarious “Excepting 1937-1938,” when unemployment shot up to 20% in some months (if memory serves). Pretty big asterisk.

But beyond that, the issue is whether FDR prolonged the Depression or not. So to answer that, you have to speculate about what would have happened to unemployment in the absence of the New Deal. E.g. suppose Harding had been in charge?

Well, there was a very severe spike in unemployment (and drop in output) during the 1920-21 depression, but as the title indicates, they were resolved very quickly. As we all know, the only reason we call it the “Great” Depression and spend so much time studying it, is that it was three to four times longer (and more severe to boot) than the typical depression up to that time.

I’m trying to think of a medical analogy, but my ignorance of medicine is making it difficult. Anyway, imagine somebody had the flu, and then Dr. Keynes came in and administered a small amount of poison every day. And so the otherwise healthy person took one month to get better, when normally it might take him 10 days. When inquiring about the poison, imagine an apologist saying, “Look at the charts! The person’s temperature started out at 105, then it fell half of a degree every day that the poison was administered, except for the spike 11 days into it when it jumped back up to 104. Clearly the poison helped get rid of the flu.”

04 Jan 2009

"Change the Game"

All Posts No Comments

So said a billboard when I used to run laps on the rooftop of an NYU building in grad school. At the time I was struggling with a 3rd year paper topic. I was trying to do something “bold” like Nash (at least as depicted in the Ron Howard fib fest) but I ended up merely showing that you could get arbitrarily large voter turnout even with rational agents who only care about the outcome. (Granted, you need to give me a bunch of assumptions on the preferences of the voters. But it’s not as bad as it first sounds, and in fact one of my professors started out telling me it couldn’t be done, and then 15 minutes later said, “OK I buy that” and then said the result wasn’t interesting. Grr.)

Anyhow let’s stop with my bitter grad school reminiscences and get to longtime reader Zach Kurtz’s email:

I devised a new way to play monopoly (originally for fun) and it has since evolved into a way to test the affects of central bank actions on a market (on players who don’t know they’re being observed). Using electronic banking edition of Monopoly, I would play as the banker. Unlike most monopoly games however, players have the ability to take out loans and make deposits (interest rates being set by the banker). Landing on a property or utility opens up an auction for players to bid (so prices are determined by the market). The winner of the property then has the option (starting the next turn) to put the property up for public offering to sell shares in the ‘holding company’ of that property.

I want to test how the manipulation of interest rates by the central bank affects market behavior and risk making decisions, as predicted by Austrian economists.

While obviously this isn’t a perfect model of real-life economics, how good do you think it is and how could I improve it (without making the game too complex)? What are some other variables that could be important to test?

I told Zach one problem is that he doesn’t have long-term projects, so it wasn’t clear how to model a cluster of errors a la Austrian business cycle theory.

In general, I don’t understand why more Austrians aren’t doing simulations. I think you could fairly easily show the effects of Fed distortions, and also show why idle resources should be left alone and gradually reincorporated back into the economy.

04 Jan 2009

The New & Improved Website

All Posts No Comments

Thanks to Ian McDonough who revamped the site’s appearance and took the title seriously when we discussed compensation. If any of you own an Arby’s chain and are big fans of the site, we should talk.

In the coming days I am going to make some other, minor changes, like adding a Blogroll etc. We have to get this place ready for prime time once my new book hits the NYT bestseller list. Company is coming! Pick up those socks, TokyoTom!

04 Jan 2009

Murphy Praises and Criticizes James Hansen

All Posts No Comments

Uh oh, another post on climate change that may stir up the hornet’s nest in the comments. Anyway, here I give a guest response to NASA’s James Hansen’s open letter to Barack Obama. An excerpt:

But there’s the rub. The politicians are not going to [follow Hansen’s advice and] impose a simple carbon tax. Instead, they will install a confusing cap & trade program, because it will be easier to hide its impacts (in terms of higher energy prices) from voters, and because it provides the politicians with more opportunity to bestow blessings or punishments on certain sectors. For example, the various cap & trade plans differ in their details over whether the permits should be auctioned or freely disbursed, and which groups (power plants, local governments, etc.) should get the free permits. And we can be quite certain that the politicians will, on net, extract far more revenue from the economy after the imposition of the new carbon scheme.

Ironically, Hansen seems to know all of this, for he writes:

Optimism is fueled by expectation that decisions will be guided by reason and evidence, not ideology. The danger is that special interests will dilute and torque government policies, causing the climate to pass tipping points, with grave consequences for all life on the planet.

The President-elect himself needs to be well-informed about the climate problem and its relation to energy needs and economic policies. He cannot rely on political systems to bring him solutions – the political systems provide too many opportunities for special interests.

And yet, Hansen’s eight-page missive is on what policies the government ought to pursue, since persuasion and argument are obviously inadequate. Professor Hansen is sure that he is right, and he wants the new President to force everyone else into line—immediately.

We can only hope that in his next letter, Dr. Hansen explains how the leader of the U.S. political system will implement these suggestions without recourse to the political system. I don’t consider it too flippant to compare Hansen’s letter to a request that the Pope reform the Catholic mass without involving the Church.

03 Jan 2009

Some Common Sense From Fred Thompson

All Posts No Comments

Easy stuff for Free Advice readers, but refreshing nonetheless. Another actor whose intuition is much sounder than that of our most recent Nobel laureate. (HT2 Rob A.)

03 Jan 2009

Late Night YouTube Posts!!

All Posts No Comments

OK as always, instead of working on whatever it is I’m supposed to be doing right now, I got sidetracked by the related links when I looked up the ending for Episode VI for the previous post. Our theme tonight is Star Wars.

This one is pretty good. It reminds me of an idea I had many years ago: Wouldn’t it be funny if you compiled a bunch of clips of Michael Jordon turning the ball over, missing gimme shots, etc.? I bet you could come up with several minutes that made him look terrible. To wit:

This next one is a bit obvious, but funny nevertheless. It is titled Mace Windu uncensored, so don’t play it with grandma in the next room:

And to wrap it up, some alternate James Earl Jones lines edited into Episode IV clips. It’s not hilarious but funny enough that you end up watching the whole thing.